Financing for Public Small and Medium-Sized Enterprises: The Cases of the Republic of Korea and the United States
FINANCINGFORPUBLICSMALLANDMEDIUM-SIZEDENTERPRISES THECASESOFTHEREPUBLICOFKOREAANDTHEUNITEDSTATES NOVEMBER2023 FINANCINGFORPUBLICSMALLANDMEDIUM-SIZEDENTERPRISESTHECASESOFTHEREPUBLICOFKOREAANDTHEUNITEDSTATES NOVEMBER2023 CreativeCommonsAttribution3.0IGOlicense(CCBY3.0IGO) ©2023AsianDevelopmentBank 6ADBAvenue,MandaluyongCity,1550MetroManila,PhilippinesTel+63286324444;Fax+63286362444 www.adb.org Somerightsreserved.Publishedin2023. ISBN978-92-9270-464-3(print);978-92-9270-465-0(electronic);978-92-9270-466-7(ebook) PublicationStockNo.TCS230540-2 DOI:http://dx.doi.org/10.22617/TCS230540-2 TheviewsexpressedinthispublicationarethoseoftheauthorsanddonotnecessarilyreflecttheviewsandpoliciesoftheAsianDevelopmentBank(ADB)oritsBoardofGovernorsorthegovernmentstheyrepresent. ADBdoesnotguaranteetheaccuracyofthedataincludedinthispublicationandacceptsnoresponsibilityforanyconsequenceoftheiruse.ThementionofspecificcompaniesorproductsofmanufacturersdoesnotimplythattheyareendorsedorrecommendedbyADBinpreferencetoothersofasimilarnaturethatarenotmentioned. Bymakinganydesignationoforreferencetoaparticularterritoryorgeographicarea,orbyusingtheterm“country”inthispublication,ADBdoesnotintendtomakeanyjudgmentsastothelegalorotherstatusofanyterritoryorarea. ThispublicationisavailableundertheCreativeCommonsAttribution3.0IGOlicense(CCBY3.0IGO)https://creativecommons.org/licenses/by/3.0/igo/.Byusingthecontentofthispublication,youagreetobeboundbythetermsofthislicense.Forattribution,translations,adaptations,andpermissions,pleasereadtheprovisionsandtermsofuseathttps://www.adb.org/terms-use#openaccess. ThisCClicensedoesnotapplytonon-ADBcopyrightmaterialsinthispublication.Ifthematerialisattributedtoanothersource,pleasecontactthecopyrightownerorpublisherofthatsourceforpermissiontoreproduceit.ADBcannotbeheldliableforanyclaimsthatariseasaresultofyouruseofthematerial. Pleasecontactpubsmarketing@adb.orgifyouhavequestionsorcommentswithrespecttocontent,orifyouwishtoobtaincopyrightpermissionforyourintendedusethatdoesnotfallwithintheseterms,orforpermissiontousetheADBlogo. CorrigendatoADBpublicationsmaybefoundathttp://www.adb.org/publications/corrigenda.Notes: Inthispublication,“$”referstoUnitedStatesdollars. ADBrecognizes“Korea”astheRepublicofKorea.CoverdesignbyAnthonyVillanueva. Printedonrecycledpaper Onthecover:Smallandmedium-sizedenterprisesinAsiacontributesignificantlytoeconomicdevelopmentandemployment,yetfacedifficultiesaccessingfinance.(photobyADB). Contents Tables,Figures,andBoxesiv Forewordvi Acknowledgmentsviii Abbreviationsix ExecutiveSummaryx I.Introduction1 II.TheEconomicContributionofSmallandMedium-SizedEnterprises3 DefinitionofaSmallandMedium-SizedEnterprise3 OverviewofSmallandMedium-SizedEnterprisesandtheirFinancingChallenges3 ProblemsforSmallandMedium-SizedEnterprisesinObtainingAccesstoCredit4 III.HowBaselIIAffectsSmallandMedium-SizedEnterpriseFinancing9 BaselII/IIIandSmallandMedium-SizedEnterpriseFinancing9 HowBaselIIIAffectsSmallandMedium-SizedEnterpriseFinancing10 IV.SmallandMedium-SizedEnterprisePublicLending:TheCaseoftheRepublicofKorea16 SmallandMedium-SizedEnterpriseSupportSystemsintheRepublicofKorea16 TheIndustrialBankofKorea18 V.SmallandMedium-SizedEnterprisePublicLoanGuarantees: TheCaseoftheU.S.SmallBusinessAdministration35 History,Mission,andObjectives35 KeyProgramsandProducts39 EconomicImpact46 VI.Conclusion51 References53 Tables 1KeyFeaturesoftheBaselAccords 11 2KeyFeaturesoftheIndustrialBankofKoreaAct 20 3UnsecuredLoansforSmallandMedium-SizedEnterprisesbytheIndustrialBankofKorea 22 4IndustrialBankofKoreaBondsOutofTotalDepositary 22 5UnsecuredSmallandMedium-SizedEnterpriseLoansamongMajorKoreanBanks 24 6SmallandMedium-SizedEnterpriseFinancingduringCOVID-19 24 7HighlightsofthePre-LendingAssessmentoftheIndustrialBankofKorea 29 8HighlightsoftheInterimReviewoftheIndustrialBankofKorea 30 9DelinquencyRatioinSmallandMedium-SizedEnterpriseLoans 31 10HighlightsofCorporateRestructuringoftheIndustrialBankofKorea 31 11CorporateRehabilitationSupportPrograms 32 12ExistingCorporateRehabilitationSupportPrograms 32 13GraduationRatesofIndustrialBankofKoreaforallRehabilitationSupportPrograms 33 14SubcategoryofGraduationRatesofIndustrialBankofKoreaforFast-TrackProgram+ 33 Pre-fast-TrackProgram 15SmallBusinessAdministrationBudget,FiscalYear2020 37 167(a)LoanProgramSubsidyandFeeStructure 39 17504LoanProgramSubsidyandFeeStructure 40 18SummaryoftheMicroloanProgram’sKeyFeatures 41 19MicroloanPerformanceIndicators,2014–2021 42 20DisasterReliefLoans,2011–2019 43 21SmallBusinessInvestmentCompanyProgramKeyFeatures 44 22SmallBusinessInvestmentCompanyProgramPerformance 46 Figures1SmallandMedium-SizedEnterpriseSupportSystemsintheRepublicofKorea 17 2IndustrialBankofKoreaataGlance 18 3DevelopmentoftheIndustrialBankofKorea 19 4KeyProvisionsfortheIndustrialBankofKorea 21 5BreakdownofIndustrialBankofKoreaSmallandMedium-SizedEnterpriseLoanPortfolio 21 6NumberofClientsintheIndustrialBankofKorea 23 7IndustrialBankofKorea’sSafetyNetProvisionforSmallandMedium
